Yields on dividend stocks are significantly higher than they were last year, but they’re still pretty paltry compared with historical norms. The yield on the S&P 500 is now up to 2.27%, according to Birinyi Associates. A year ago, dividend stocks in the benchmark index offered a yield of just 1.97%. Neither of those numbers is good compared to the average 3.05% yield on S&P 500 dividend stocks since 1960 is 3.05%, according to New York University’s Aswath Damodaran. In addition to less-than-stellar payouts, decent yields are hard to come by in another way: There’s just not a whole lot of choice. Only about only about 20 companies in the S&P 500 carry dividend yields of at least 4%.
You don’t want to overpay for yield, so you want to identify cheap stocks. After all, dividend stocks are best used as long-term holdings, and valuations tend to revert to the mean over time. That means shares with high price-to-earnings multiples are in danger of having a day of reckoning. Cheap stocks, however, can get a boost from multiple expansion. With all that in mind — and it’s a lot — we scoured the S&P 500 for cheap dividend stocks that you should be piling into. Here are six of the best: Pfizer Inc. (PFE), Verizon Communications Inc. (VZ), Ford Motor Company (F), HCP, Inc. (HCP), General Motors Company (GM) and AT&T Inc. (T).